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Analyst: Vodafone Weakness Likely Tied To Corbyn's Proposal To Nationalize Broadband Service

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Analyst: Vodafone Weakness Likely Tied To Corbyn's Proposal To Nationalize Broadband Service

Jeremy Corbyn, leader of the U.K.'s Labour Party, plans to nationalize British Telecom's Openreach broadband network and provide free internet if the party wins power. 

The proposal is impacting shares of Vodafone (NASDAQ: VOD), according to an Edward Jones analyst. 

The election pledge made by Corbyn Thursday caught many by surprise and sent BT’s shares, which are listed on the London Stock Exchange, down as much as 3.7%, wiping nearly 500 million pounds off its market value, according to Reuters.

Analyst: Plan Could Eliminate Broadband Revenue 

"The weakness in Vodafone shares is likely related to a proposal made by U.K. Labour Party candidate Jeremy Corbyn in which British Telecom's Openreach division would be nationalized. Openreach provides the network infrastructure for BT and resells capacity to other service providers, such as Vodafone," Edward Jones analyst David Heger told Benzinga. 

Openreach is a division of British Telecommunications, now known as BT Group. Openreach owns, operates and maintains the U.K's phone and broadband lines. 

As part of the proposal, Corbyn said he would make broadband free for everyone in the U.K., Heger said, adding that such a move would potentially eliminate broadband revenue for British service providers.

Johnson: 'Crazed Communist Scheme'

Boris Jonnson U.K’s current Prime Minister has dismissed Corbyn’s broadband plan as "crazed communist scheme," The Guardian reported.

The general election in the U.K. will be held on Dec. 12.

The Conservative Party's support has hit 40%, increasing its lead over Labour ahead of the election, according to the Evening Standard

Although Labour had been creeping up on the Conservatives over the past week, support for Corbyn's party remained at 29% as f Friday, the publication said.

Price Action

Vodafone shares were down 2.97% at $19.89 at the time of publication, while Orange (NYSE: ORAN) shares were up 0.25% at $16.01. Verizon Communications Inc. (NYSE: VZ) shares were trading down slightly at $59.30. 

Related Links:

UK GDP: Economy Avoids Recession Despite Weak Growth

Brexit Update: Queen Elizabeth II Says UK's Priority Is To Leave EU At End Of Month

Photo by Johnnie Pakington via Wikimedia

Latest Ratings for VOD

DateFirmActionFromTo
May 2019UpgradesHoldBuy
Mar 2019UpgradesNeutralOutperform
Mar 2019DowngradesOutperformNeutral

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